COMMISSIONER OF INCOME-TAX Vs. GURINDER SINGH KARION

JUDGEMENT

(1.) THE following questions of law have been referred to this court for its opinion at the instance of the revenue : " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing depreciation at the rate of 15% on the ice plant machinery valuing Rs. 3,84,132 during the assessment year 1970-71 ?

(2.) WHETHER, on the facts and in the circumstances of the case, the expenditure of Rs. 24,532 for the assessment year 1970-71, by way of payment of interest to M/s. National Small Industries Corporation Ltd. , New Delhi, was an admissible deduction under Section 37 (1) of the Income-tax Act, 1961?" 2. Briefly stated the facts are that the assessee runs a cinema in the name of Nandan Theatre, a cold storage, and also derives income from share in firms. On December 21, 1962, the assessee entered into an agreement with M/s. National Small Industries Corporation, New Delhi, for the purchase of some Ammonia Compressors on hire purchase basis. The assessee failed to pay the instalments due to the above , Corporation and, hence, a sum of Rs. 38,218 by way of interest up to April 30, 1970, in respect of the instalments which had fallen in arrears was demanded by the said Corporation from the assessee. In his assessment for the assessment year 1970-71, the assessee claimed a deduction of Rs. 38,218 on account of the said interest.

(3.) THE ITO disallowed the claim to the extent of Rs. 24,538 on the ground that the entire loan on which interest was claimed was not for the purposes of the assessee's business. The ITO calculated interest on a sum of Rs. 76,000 at the rate of 18%, as, according to him, only this much loan related to the assessee's business. Thus, out of the total claim of Rs. 38,218, a sum of Rs. 13,680 was allowed and the balance of Rs. 24,538 was disallowed. The AAC affirmed the finding of the ITO. The assessee's appeal was accepted by the Tribunal and, hence, the revenue has come on a reference to this court.